Posts Tagged ‘technical analysis’
For the first time in more than three years, Chinese stocks are beginning to show some promise for growth investors looking for opportunities outside of the United States.
The benchmark Shanghai Composite Index has moved to just above its close of 2013; hence, it’s more or less in line with the S&P 500 and Dow Jones Industrial Average.
Many of you are aware of my continued bullishness for China, as I have talked about this in recent commentaries.
We saw some encouraging estimates on Tuesday. The country’s industrial output is estimated to rise 9.5% this year, which could support gross domestic product (GDP) growth of 7.5%, according to Industry and Information Technology. (Source: “China targets factory output growth of around 9.5 percent in 2014,” Reuters, February 17, 2014.) What’s interesting is that the key areas of growth for this year include telecommunications, along with a big jump in business for software and information technology (IT).
You can play the growth in these areas via Chinese IT services firms, such as iSoftStone Holdings Limited (NYSE/ISS, $5.15, Market Cap: $297 million), a provider of IT services to clients and globally. Services include consulting and solutions, IT services, and business process outsourcing. The company is growing with its headcount increasing 27% to 17,702 in the third quarter compared to the same time in 2012. Broken done, 65.1% of the company’s global sales came from the Greater China area, 21.4% were from the U.S., Europe accounted for 7.3%, and Japan made up 5.8%.
Analysts expect iSoftStone to report revenue growth of 13.6% to $432.81 million in 2013, followed by 17.8% to $510.06 million … Read More
Oil prices have rallied back to the $100.00-per-barrel level on some near-term supply and inventory concerns.
While the upside move is rewarding the buyers of oil stocks, I don’t think oil prices are set for an extended rally.
The chart of the West Texas Intermediate (WTI) crude oil shows oil prices bouncing higher after the formation of a bullish double bottom, based on my technical analysis. And while oil prices can head higher on the chart, I just don’t see any moves being sustainable.
The catalyst for higher oil prices has more to do with tight inventories driven by a rise in demand. The inventory of oil contracted by 1.5 million barrels per day in October to December 2013, according to the International Energy Agency (IEA). The IEA suggests the demand for oil will rise by 50,000 barrels per day to 1.3 million barrels in 2014. (Source: Johnson, C. and Sheppard, D., “Robust demand tightening oil market, IEA says,” Reuters, February 13, 2014.) If this estimate pans out, oil prices could edge higher and hold above $100.00, but I doubt the move will last that long.
Now, if China jumps out of its sluggish growth (read “Investment Opportunities in Depressed Chinese Stocks”) and Europe can drive its economic renewal, then we could see brighter prospects for oil prices.
On the supply side, America is relying less on the Organization of the Petroleum Exporting Countries (OPEC) and foreign oil as American oil companies continue to squeeze more oil out of the ground, specifically shale oil.
There may even be a time down the road when … Read More
Here we are in just the third week of 2014 and the media is all over the stalling in the stock market, saying that perhaps we are at the end of the bull stock market that is now in its fifth year.
I’m hearing about the low level of the S&P 500 Volatility Index (VIX), also known as a measure of fear in the stock market. Yes, it’s low and perhaps the stock market is too relaxed, but that doesn’t always imply that we are headed for a stock market correction.
Traders are also concerned with the lack of buying so far in January, which, if it ends in the red, could suggest a down year for stocks based on historical tendencies—albeit, I doubt that.
We are seeing some stalling on the charts, as the new approach to investing this year appears to be one of prudence and not bidding the stock market higher until we see evidence of a healthier economy, stronger jobs creation, and earnings/revenue growth from corporate America.
I’m not surprised by this shift, given the massive stock market gains in 2013.
The impact of the Federal Reserve and its proposed tapering timeline appears to be less of a factor this year, as it is expected that the tapering will continue. The uncertainty surrounding tapering that drove the erratic trading of 2013 is gone; traders are now discounting in the tapering. (See “Stock Market’s Dependence on Easy Money Weakening?”)
My view is that as long as the withdrawal of the bond buying is slow and the economy delivers stronger and steady growth, market participants … Read More
In the retail sector, it’s all about vision and execution. The reality is it’s all in the details, especially in the department store sector, where it’s all about product offerings and marketing.
Of the department stores in the retail sector, Macy’s, Inc. (NYSE/M) is probably the best-managed and best-performing company. Simply take a look at rival J. C. Penney Company, Inc. (NYSE/JCP), and you’ll understand why it has been a lot better for Macy’s investors than J. C. Penney’s. (Read more of my thoughts on this in “J. C. Penney, Coach Joining the Losers in the Retail Sector?”)
While Macy’s continues to look for ways to continue its sales growth and profitability, J. C. Penney is just trying to stay afloat in the retail sector and avoid a possible bankruptcy down the road.
The chart below shows the divergence in share price between Macy’s and J. C. Penney since October 2012. Macy’s has steadily climbed, as reflected by the red candlesticks, compared to J. C. Penney, as shown by the dark green line, based on my technical analysis.
Chart courtesy of www.StockCharts.com
It’s amazing how the wrong strategy could backfire in the retail sector and cost a company like J. C. Penney billions of dollars, while rewarding a company like Macy’s for excellent execution.
Macy’s announced it would cut about 2,500 workers, which is a small fraction of its total headcount of about 175,000. The company will also look at other cost cuts that could shave about $100 million off the expense side beginning this year. (Source: “Macy’s, Inc. Outlines Cost Reduction Initiatives to Support Continued Profitable … Read More
It’s no secret that China is the biggest market for numerous raw materials, such as cement, steel, coal, copper, and oil, along with end-products, such as vehicles and mobile phones.
The growth of the middle class and wages in the country is the vital attraction for companies to go and set up shop there. Credit Suisse estimates the household wealth in the country will double to $35.0 trillion by around 2015, based on achieving sustainable gross domestic product (GDP) growth at or near the current growth rate. Moreover, the government’s strategy to drive domestic consumption will also help to push up the demand for goods and services.
An area in the Chinese economy that I continue to believe has tremendous long-term potential is the auto sector, but the short-term will pose some hurdles due to some buying limits imposed by the government.
The Chinese motor vehicle market is the largest in the world, and it continues to distance itself from the United States. The upward demand for vehicles remains in spite of the government’s efforts to limit vehicle sales in many of China’s largest cities in an attempt to cut pollution.
As a potential market for vehicles, China remains tops. Auto sales surged 16% in November following a 24% jump in October, according to the China Association of Automobile Manufacturers. (Source: China Association of Automobile Manufacturers web site, last accessed December 11, 2013.) About 1.7 million vehicles were sold for an annualized growth of 20.4 million. By comparison, sales of autos increased nine percent in the United States in November to an annualized rate of 16.4 million vehicles, according to … Read More
Whether the lofty expectations pan out or not, believe it or not, there is more than one investment opportunity you can take advantage of to make money on the success of The Hunger Games series and other major Hollywood blockbusters.
The company behind the production of The Hunger Games is Lions Gate Entertainment Corp. (NYSE/LGF), which is already up over 100% from its 52-week low and could head higher if the film sets new records, meaning this production company may be an investment opportunity. In addition to films, Lions Gate also produces 28 television shows over 20 networks.
Chart courtesy of www.StockCharts.com
Fundamentally, Lions Gate has delivered decent results, beating the Thomson Financial consensus earnings-per-share (EPS) estimate in each of the past four quarters, making it a possible investment opportunity. Revenues are estimated to grow 6.4% to $2.93 billion in fiscal 2015 ending in March. Fiscal earnings are estimated to rise 50% to $1.54 per diluted share in fiscal 2015. While the best gains are behind the stock for the time, longer-term, I see Lions Gate as a good investment opportunity.
A second investment opportunity on the success of The Hunger Games series and other blockbusters is IMAX Corporation (NYSE/IMAX). IMAX offers venues in which you can see the film on a specialized 12,000-watt power-packed screen that could be as high as 98 feet. In general, every major blockbuster film is shown on IMAX screens around the world…. Read More
Have you noticed the cost of flying has become more expensive as the demand for travel rises in the airline sector? Rates have clearly been ratcheting higher. Not by much, but enough to drive up profits in what has been the high-flying airlines sector.
But this boost in market demand is not confined to America’s borders; rather, there has been an overall pick-up in global travel. Rising wealth in China, India, Asia, and Latin America combined has driven up the demand for airline travel and the associated services, such as hotels and restaurants.
The profit picture has turned upward. Airlines around the world are buying more planes. We are seeing a sort of renaissance in the airline sector, which is estimated to report revenues of $708 billion and profits of $16.4 billion in 2014, according to the International Air Transport Association (IATA). (Source: Frary, M., “Airlines to make $16.4 billion in 2014, says IATA,” September 24, 2013, Public Sector Travel web site, last accessed November 14, 2013.)
The IATA estimates 3.12 billion travelers will ride the air waves this year, representing the first time this figure has been in excess of three billion.
And with the price of oil and jet fuel stabilizing, we could see an expansion in margins for the airline sector.
The evidence of the strength in the airline sector is reflected in the chart below of the Dow Jones U.S. Airlines Index. Note the strong upside moves since the emergence of a bullish golden cross (as indicated by the oval surrounding the moving averages) at the beginning of this year. Also notice the strong relative … Read More
Imagine letting a losing trade run, and before you even realize it, the position is down 20%, 30%, or more. Your $10.00 stock declined 30% to $7.00; you decide to hold the position, hoping for a rebound, but deep down you know the stock would need to rally more than 40% just for you to break even. Clearly, it’s not easy when a stock falls to greater depths.
But that’s why you should take the opportunity to dump losers when the stock market rallies, as is the case at this time. Avoiding a loss is just as good as making profits.
As many of you know, I believe the stock market is vulnerable to some selling and a stock market correction, based on my technical analysis of the charts. The S&P 500 is fighting resistance to advance higher, and the Dow Jones Industrial Average, while setting anther record-high on Monday, continues to show the potential of a stock market correction of at least six percent.
Think about how the stock market has moved to these levels. The easy money policy pushed by the Federal Reserve has been a key driving force behind this four-year run-up. But now, with the Fed expected to begin tapering in December or early 2014, the focus will shift to the economy and corporate revenue growth—which aren’t so stellar. In fact, in both cases, they’re flat.
Even the surge in the initial public offering (IPO) market is a red flag in my view. When I see an IPO double on its first day, it reminds me of the euphoria that I witnessed in late 1999, just … Read More
Success in the retail sector is all about image, marketing, the brand, and having the right people to execute on the strategy.
J. C. Penney Company, Inc. (NYSE/JCP) is a perfect example of how not to operate in the retail sector and, as such, the company is failing.
Aeropostale, Inc. (NYSE/ARO) and Abercrombie & Fitch Co. (NYSE/ANF) are two other retailers that have failed to adapt to the changing retail sector amid competition.
In the luxury end of the retail sector, Coach, Inc. (NYSE/COH) continues to struggle with sales. Part of this may have to do with some of the key metrics I mentioned earlier, but a major factor has definitely been the emergence of Michael Kors Holdings Limited (NASDAQ/KORS). As many of you will already know, I favor Michael Kors as the top player in the luxury retail sector.
While Coach and Michael Kors both are heavily operating in the sale of women’s accessories in the retail sector, the big difference, in my view, has been the successful move of Michael Kors into men’s and women’s apparel, which is found in many of the top-end department stores, as well as company stores. From pants, shirts, and suits to belts and coats, Michael Kors is quickly becoming a sought-after brand for fashion lovers in the retail sector.
The chart of Michael Kors below shows the steady upward trend in the stock since the beginning of 2012. There is some congestion and resistance at this time (as shown by the horizontal blue line near the top of the chart), but we are seeing a bullish ascending triangle and a possible upside … Read More
As I’ve written in these pages before, Apple Inc. (NASDAQ/AAPL) needs to increase its brand in the Chinese economy in order to really entice investors and jumpstart the stock. (Read “Update: Apple’s Attempts to Enter Emerging Markets a Blunder?”)
The reason is simple: China is the biggest mobile phone market in the world with over one billion users, which is more than three times the size of the United States market.
Apple is rumored to have a major distribution deal in place with China Mobile Limited (NYSE/CHL), the largest cell phone operator in the country with a market cap of $210 billion. The company services about 755 million customers as of the end of September, which is huge. (Source: China Mobile Limited web site, last accessed November 5, 2013.)
In my view, Apple could see its business accelerate if a deal is finally announced and, of course, if Apple can execute in the Chinese economy via much cheaper smartphones than the “iPhone 5C.”
For China Mobile, the addition of Apple could also generate new sales and higher margins, so it’s a win-win situation for both companies. The move towards 4G networks will also help to drive growth.
And with the rise in income levels in the cities and rural areas, we could see a major push to buy higher-end smartphones, such as those made by Apple.
China Mobile is the top mobile play in the Chinese economy. The company is bigger than Verizon Communications Inc. (NYSE/VZ) and AT&T Inc. (NYSE/T). China Mobile also owns Luxembourg-based Millicom International Cellular S.A. (OTC/MICCF), a telecom operator with mobile operations in 13 … Read More
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